Stocks

  • 26 Jan
    The Only Way To Beat The Market In The Next 10 Years

    The Only Way To Beat The Market In The Next 10 Years

    • Investment performance has to be assessed through a complete economic cycle in order to reach the highest possible long term value.
    • In this century, stocks have performed poorly from peak economic cycle to peak economic cycle.
    • Analyzing fundamental risk against the recent performance of the S&P 500 shows us that those who are long the S&P are practically accepting long term negative returns for momentum created short term positive returns.

    Introduction

    Recently, we analyzed Seth Klarman’s amazing performance and investing rationale. There were some pretty difficult things to digest, like the fact that he underperformed the S&P 500 by 50% in the late 1990s.

    But this leads us to some very interesting questions: Do we properly measure investment success? Is the investment manager that invested in internet stocks in the period from 1996 to 1999 a good manager? Similarly, is the manager that created wonderful returns in the last 7 years by being long U.S. stocks a good manager? More →

  • 16 Jan
    Gruesome Industries For Trading, Not Investing

    Gruesome Industries For Trading, Not Investing

    • Even if the industry has wonderful growth numbers, profitability might remain out of reach.
    • We’ll define and describe the industries long term investors should avoid.

    Introduction

    Most of you are familiar with Warren Buffet’s comment on the airline industry in his 2007 letter to shareholders:

    “The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.”

    Now, most connect the above statement only to the airline industry. However, in a deflationary environment where our youngsters expect lots of things for free—think WhatsApp—and extremely low interest rates, there will be more industries where shareholder wealth creation will be difficult to achieve.

    In today’s article, we’ll define and analyze some of these industries. More →

  • 10 Jan
    Don’t Be Fooled By Projections

    Don’t Be Fooled By Projections

    • Forecasts are extremely positive, but know that a bear market or a recession are never in the picture.
    • Of all the S&P 500 ratings, 49% are Buy ratings, 45% are Hold ratings, and 6% are Sell ratings.
    • Be sure to understand the risks of what you’re doing and know history. It may not repeat itself but it rhymes.

    Introduction

    Market bulls base their positivity on strong earnings and economic growth in 2017. However, analysts are usually very optimistic about future developments. But as the forecasted events come closer, most of them cut their estimations.

    Similarly to what analysts do, policy makers are also usually very positive about future economic developments. We could say that positivity is in their job descriptions. More →

  • 09 Jan
    Sven Thinks You Can Be A Millionaire & Tells You How To Get There

    Sven Thinks You Can Be A Millionaire & Tells You How To Get There

    • Investing for the long term isn’t hard and if you avoid doing stupid things, you should expect to be a millionaire when you retire or likely even sooner.
    • Maximize your IRA as it isn’t taxed.
    • Beating the market by a few percentage points leads to staggering differences in 30 years.

    Introduction

    People usually wonder how much money they should put aside and invest in stocks. Should it be 5%, 10% or 15% of your income? Should you put any lump sums into the stock market or not?

    As most of us don’t have clear plans and goals, what happens is that investors invest more when they should invest less and nothing at all when they should go all-in.

    Today’s article will describe the expected end result from investing in stocks, how much your investments will return on average, and how to create a stable strategy in order to not make costly mistakes. More →

  • 28 Dec
    2017 Looks Like Another Excellent Trading Year

    2017 Looks Like Another Excellent Trading Year

    • Rebalancing your portfolio between sectors and markets should lower your risks and increase your returns in 2017.
    • 2016 is an excellent example of how such a strategy works when the general stock market is overvalued.
    • Things like avoiding REITs in August 2016 or entering metals will be easy to spot and act upon, even in 2017.

    Approaching The Current Market Risk Reward Puzzle

    A recent Wall Street Journal article raised the question of whether investors looking to get into the market now are too late for the Dow 20,000 party. Many investors watched the 7-year stock bull market from the side-lines after they got burned during the latest financial crisis and didn’t overcome their anxiety and invest again. The article suggested that investing now is a good thing to do if you are a long-term investor. More →

  • 23 Dec
    The Dow To Hit 20,000 Alongside A Strong Dollar, Time To Be Greedy?

    The Dow To Hit 20,000 Alongside A Strong Dollar, Time To Be Greedy?

    • Investors can expect a nominal return from stocks of 4.3% per year going forward.
    • The story looks far different for speculators. The strong dollar and higher debt costs should weigh on the economy and stocks.
    • Specific sectors and international diversification offer a better risk reward situation.

    Introduction

    The Dow Jones is flirting with 20,000 points, and it’s possible that by the time you’re reading this, it has already crossed the mark.

    In addition to the Dow reaching all-time highs, the dollar index has also reached new highs for the decade. More →

  • 18 Dec
    Sunday Edition: Looking For Value – Market Heavyweight Or Scrappy Underdog?

    Sunday Edition: Looking For Value – Market Heavyweight Or Scrappy Underdog?

    In sports, there is something incredibly compelling about the underdog that nobody expects to win, but does it anyway. It’s even better when it happens against an opponent that is obviously superior in practically any measurable way. As a fan of sports like football and basketball, I like the playoff after-season, when the best handful of teams battle it out for ultimate supremacy. In particular, I get a kick out of trying to pick out the team that I think everybody is dismissing but could be in just the right place, at the right time to prove them all wrong. True, Cinderella doesn’t often actually get to wear the glass slipper, but boy, is it fun when she does! More →

  • 09 Dec
    Check Your Dividend Yielders Before It’s Too Late

    Check Your Dividend Yielders Before It’s Too Late

    • Higher interest rates will increase required returns while higher debt costs will lower available cash for dividends.
    • However, things vary extremely among sectors so check your portfolio stock by stock.
    • The current 5% shareholder yield is unsustainable with aggregate earnings yielding 3.93%.

    Introduction

    Things are changing!

    We have been enjoying a period where yielders were in high demand as interest rates declined. However, there are two things that will have a severe impact on dividends and asset prices. The first is that low interest rates enabled companies to take on more debt and increase their return to shareholders while keeping their interest expenses low. The second is that with the Fed about to increase interest rates and the yield on the 10-year treasury note up 75% from its July low, the value of your dividend yielders is also about to collapse because stocks simply carry more risk than treasuries. More →

  • 08 Dec
    Brazilian Investment Opportunities

    Brazilian Investment Opportunities

    • Many stocks in Brazil have the potential to double in 2017, but they also have the potential to lose 50%.
    • We’ll briefly describe investment opportunities and our approach to the research.
    • Emerging market volatility should be considered a great thing, not a risk.

    Investing Rationale

    Monday we discussed the current situation in South America. Reading the article, available here, will give you a good intro into what we’ll discuss today.

    The source of our long-term investment ideas comes from constant research on macro trends. These ideas are bound to benefit from positive economic, demographic, and political environments. More →

  • 07 Dec
    Want To Be A Better Than Average Investor? Sven Tells You How

    Want To Be A Better Than Average Investor? Sven Tells You How

    • Average investors don’t even make 50% of the market’s return.
    • The stock market looks simple in hindsight, but behavioral issues stop us from doing the right thing. We’ll see how by looking at an example with Wal-Mart.
    • To make market returns you have to do nothing. But to make above market returns, you have to do what others aren’t willing to do.

    Introduction

    According to Dalbar, average investors don’t do as well as the general stock market. In fact, they don’t come even close. More →

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